Chapter 9 - Damages, LAD, Deposits & Part-Payments Flashcards Preview

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Flashcards in Chapter 9 - Damages, LAD, Deposits & Part-Payments Deck (33)
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1
Q

DAMAGES

overview

A

1) Scope of claim for damages
2) Types of damages
3) Remoteness of damages
4) Mitigation of damages

2
Q

SCOPE OF CLAIM FOR DAMAGES

Overview

A

1) Scope of S.74
2) Action in damages for breach vs action for indemnity
3) What can be claimed
4) Who can claim

3
Q

SCOPE OF CLAIM FOR DAMAGES

Scope of S.74

A

Malaysian Rubber Development Corp Bhd v Glove Seal Sdn Bhd:

  • Naturally arose in the usual course of things; or
  • Which the parties knew, when they made the ctt, to be likely to result from the breach.
  • No actual knowledge is necessary, in contemplation is sufficient.

Originally:

Hadley v Baxendale:

  • Naturally arose in the usual course of things; or
  • Which the parties knew, when they made the ctt, to be likely to result from the breach.
  • No actual knowledge is necessary, in contemplation is sufficient.
4
Q

SCOPE OF CLAIM FOR DAMAGES

damages vs indemnity

A

Malayan Banking Bhd v Basaruddin Ahmad Khan:

1) damages:

  • compensation for loss or injury suffered;
  • arising from the breach of ctt & not a subject of the contract.

2) indemnity:

  • right which has to be provided for in the original bargain;
  • formal legal acceptance of responsibility for damages or loss.
  • does not take away right to claim for damages.
5
Q

SCOPE OF CLAIM FOR DAMAGES

Types of damages that can be claimed

A

Ismail v Hj. Taib:

General damages - first limb S.74:

  • to protect expectation of interest;
  • based on dimunition of value and costs of care & loss of profits.

Special damages - second limb S.74:

  • to protect reliance interest;
  • parties have not suffered any loss of profits, but has incurred expenses in reliance of contract.
  • based on wasted expenditure or damages in preparation of the performance of the contract.
6
Q

SCOPE OF CLAIM FOR DAMAGES

Who can claim

A

Lim Foo Yong & Sons Realty Sdn Bhd v Datuk Eric Taylor:

  • The word “party” under S.74 can only mean a party who is a signatory to the contract or his estate.
7
Q

TYPES OF DAMAGES

Overview

A

1) Compensatory damages

2) Non-compensatory damages

8
Q

COMPENSATORY DAMAGES

Types & scope

A

1) Pecuniary loss:
- loss of profit or reliance expenditure.
2) Non-pecuniary loss:
- e.g. damages for inconvenience, distress or anxiety.

Watts v Marrow:

  • General rule: a contract-breaker is not liable for any distress, frustration or anxiety which his breach may cause;
  • Exception: When the very object of the ctt provide for pleasure, relaxation & peace of mind.
  • Example: Holiday CTT (Jarvis Swan Tours Ltd), CTT with solicitor to prevent further distress (Heywood v Wellers);
  • in such a case, damages may be recoverable if the breach & mental suffering are directly related to that inconvenience & discomfort.
9
Q

NON-COMPENSATORY DAMAGES

Overview

A

1) Nominal damages

2) Exemplary damages

10
Q

NON-COMPENSATORY DAMAGES

Nominal damages

A

Popular Industries Limited v Garment Manufacturing Sdn Bhd:

  • P seeking for damages must prove the damages & the amount of damages;
  • If he proves contravention of rights, he will be awarded nominal damages;
  • If he proves damages but not the amount, he may be awarded nominal damages.
11
Q

NON-COMPENSATORY DAMAGES

Exemplary damages - when

A

Rookes v Barnard:

  • there has been oppressive, arbitrary & unconstitutional conduct; or
  • D’s conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable by himself; or
  • Where a statute has expressly authorised it.
12
Q

NON-COMPENSATORY DAMAGES

Exemplary damages - example

A

Breach of promise to marry - Dennis v Sennyah:

  • Damages in action for breach of promise to marry is not to repay the P for the temporal loss but to punish the D in an exemplary manner.
13
Q

REMOTENESS OF DAMAGES

First limb S.74 - naturally would arise - general damages

A

1) Bee Chuan Rubber Factory Sdn Bhd v Loo Sam Moi:

  • Damages recoverable for delay in completion of an ordinary house required for personal occupation include reasonable cost of living accommodation elsewhere and storing furniture.
  • i.e. the cost to store furniture & accommodation to live somewhere is damages that naturally would arise due to the breach.

2) Bank Bumiputra Bhd Kuala Terengganu v Mae Perkayuan Sdn Bhd:

  • the loss of of profits on the housing project which the customer would suffer was the natural & probable result of the breach of agreement by bank.
  • i.e. the loss of profits is damages that naturally would arise due to the breach.
14
Q

REMOTENESS OF DAMAGES

Second limb S.74 - which the party knew to be likely to result from the breach - special damages

A

1) Teoh Kee Keong v Tambun Mining Co Ltd:

  • Appellant claims for the value of work done, outlay and materials used as well as labour and expenses.
    FC held:
  • Claims allowed;
  • It was clearly in contemplation of the contracting parties that the appellant should not be denied the fullest opportunity to recoup all the monies he had invested into the enterprise.

2) Tham Cheow Toh v Associated Metal Smelters Ltd:

  • From the evidence it is clear that the defendant had special knowledge regarding the required temperature.
  • When the specification was not complied with, judge made an award for loss of profit of P who required the furnace for his business;
  • Damages for loss of profit in this case is made under 2nd limb (instead of 1st limb) as D had special knowledge of the required temperature.
15
Q

MITIGATION OF DAMAGES

Duty to mitigate damages

A

Kabatasan Timber Extraction Co v Chong Fah Shing:

  • General rule: party seeking damages is under duty to mitigate his losses.
  • P cannot claim to be compensated for something that is not due to the breach of D, but to his own failure to behave unreasonably after the breach.
16
Q

MITIGATION OF DAMAGES

Meaning of “duty”

SGCA, 2010

A

The Asia Star:

  • legal requirement imposed on aggrieved party to take measures to minimise avoidable losses.
  • Breach of duty to mitigate does not entitle aggrieved party to claim the part of the loss.
17
Q

MITIGATION OF DAMAGES

Basic rules on mitigation

SGCA, 2010

A

The Asia Star:

  • Aggrieved party must take all reasonable steps to mitigate losses;
  • Cannot recover damages for any loss which it could have avoided;
  • Aggrieved party who goes beyond what the law requires will not be entitled to any damages;
  • May recover expenses incurred in the course of taking reasonable steps to mitigate its loss;
  • Burden of proving failure to mitigate is on the defaulting party.
18
Q

MITIGATION OF DAMAGES

Sales of goods

A

Tansa Enterprise Sdn Bhd v Temenang Engineering Sdn Bhd:

  • proportion of bricks not supplied by P were so small compared to total value of contract;
  • D should have mitigated as bricks were common goods & no shortage at the market;
  • D who bought the bricks from cheaper supplier cannot be allowed to counter-claim.
19
Q

MITIGATION OF DAMAGES

Recovery of losses or expenses

A

Malaysian Rubber Development Corp Bhd v Glove Seal Sdn Bhd:

  • P taking steps to mitigate & incur expenses while at it may recover damages to indemnify him in respect of the expenses;
  • the fact that D does not know or expect the expenses incurred by P in the course of mitigating his losses does not make D not liable to compensate P.
20
Q

MITIGATION OF DAMAGES

Anticipatory breach & mitigation of losses

A

Ban Chuan Trading Co Sdn Bhd v Ng Bak Guan:

  • CA disallowed P’s claims for general damages;
  • P should have minimised his losses by taking steps to terminate the agreement as soon as it was made known to him that the premise is not available, i.e. as soon as he can anticipate the breach.
21
Q

ASSESSMENT OF DAMAGES

date of assessment

A

1) General rule - Eikobina (M) Sdn Bhd v Mensa Mercantile Pte Ltd:
- on the difference between the contract price & market price at the time of breach.
2) Claims for breach of warranty - Lee Heng & Co v C Melchers & Co:
- values are assessed on the date of delivery of goods ordered.

22
Q

ASSESSMENT OF DAMAGES

taxation of damages

A

Daishowa (M) Woods Products Sdn Bhd v Kepong Products Co Sdn Bhd:

  • deductions should be made for any sum which P would have been liable to pay in taxes.
  • conditions:

1) The money for the loss of which damages are awarded would have been subject to tax as income; and
2) Damages awarded should not be liable for another taxation.

23
Q

LAD

Whether proof of loss is necessary

A

1) the law:

S.75

2) Whether proof of loss is necessary - Cubic Electronics Sdn Bhd v Mars Telecommunications Sdn Bhd:

  • To claim for LAD under S.75, proof of actual loss is not necessary or mandatory.
  • Onus is on the party seeking to enforce LAD clause to adduce evidence of breach & evidence of the existence of the clause.
  • Once these two are established, he is entitled to the sum stipulated in the clause.
  • To raise the disputes, defaulting party may show that the damages are unreasonable or demonstrate by evidence the reasonable amount for his breach.
24
Q

DEPOSIT

Overview

A

1) Meaning of deposit
2) Scope of deposit
3) Right to forfeit deposit
4) Whether prove of actual damage is necessary
5) Right to sue for unpaid deposit & recovery of unpaid deposit
6) Relief against forfeiture of deposit
7) Equitable relief against forfeiture of deposit

25
Q

DEPOSIT

Meaning of deposit

A

Howe v Smith:

  • Money paid as a guarantee that the contract shall be performed;
  • Cannot be refunded unless there is clause to the contrary;
  • failure to complete performance in accordance with the terms of the contract will entitle the other party to forfeit the deposit.
26
Q

DEPOSIT

scope of deposit

A

Cubic Electronics Sdn Bhd v Mars Telecommunication:

  • earnest money + part-payment = deposit;
  • deposit is subjected to reasonable compensation under S.75;
  • innocent party must prove that it is reasonable to forfeit the deposit & the value forfeited is also reasonable (test of legitimate interest & proportionality in Cavendish).
  • once innocent party satisfies this, onus then shifts on the defaulting party to show that the forfeiture was excessive.
27
Q

DEPOSIT

Right & condition to forfeit deposit

A

1) Right - Skyline Trading Co v Tiow Yoke Lan:

  • rights only arise on breach of contract;
  • deposit paid under a void or ineffective contract is recoverable either based on intention of parties or on restitutionary grounds.

2) condition - Cubic Electronics Sdn Bhd v Mars Telecommunication:

  • deposit is subjected to reasonable compensation under S.75;
  • innocent party must prove that it is reasonable to forfeit the deposit & the value forfeited is also reasonable (test of legitimate interest & proportionality in Cavendish).
  • once innocent party satisfies this, onus then shifts on the defaulting party to show that the forfeiture was excessive.
28
Q

DEPOSIT

Whether proof of actual damages is necessary

A

1) Linggi Plantations Ltd v Jagatheesan:

  • GR: deposit can be forfeited, whether or not actual damages is proven;
  • Exception: where deposit is unusual or extortionate, deposit may be considered as penalty & in such a case, actual damages / loss must be proven.
  • See: Principles in Cubic Electronics Sdn Bhd v Mars Telecommunication.

2) Sun Properties Sdn Bhd v Happy Shopping Plaza Sdn Bhd:

  • if it is a true deposit or earnest money, the sum is irrecoverable;
  • it can be lawfully forfeited whether or not loss or damages is proven.
29
Q

DEPOSIT

Right to sue for unpaid deposit & recovery of unpaid deposit

A

Morello Sdn Bhd v Jaques (International) Sdn Bhd:

  • party is entitled to recover any unpaid deposit which is payable under the contract;
  • no need to prove his damage & no duty to mitigate his loss.
  • may recover damages for breach also, but must set-off with the deposit paid.
  • even if there is no provision for forfeiture, this does not preclude seller from recovering the unpaid deposit.
30
Q

DEPOSIT

Relief against forfeiture of deposit

A

1) General:

If the deposit is excessive or unreasonable, it may be subjected to S.75, i.e. must prove loss.

2) Linggi Plantations Ltd v Jagatheesan:
- where deposit is unusual or extortionate, deposit may be considered as penalty & thus S.75 is applicable.
3) Cubic Electronics Sdn Bhd v Mars Telecommunication:

  • deposit is subjected to reasonable compensation under S.75;
  • innocent party must prove that it is reasonable to forfeit the deposit & the value forfeited is also reasonable (test of legitimate interest & proportionality in Cavendish).
  • once innocent party satisfies this, onus then shifts on the defaulting party to show that the forfeiture was excessive.
31
Q

DEPOSIT

Equitable relief against forfeiture of deposit

A

1) English courts - Stockloser v Johnson:
- Court has jurisdiction to grant relief against forfeiture of deposit if the forfeiture clause is PENAL in nature & it is UNCONSCIOUS for the party to retain the money.
2) Malaysian courts - K Umar Kandha Rajah v EL Magness:
- FC referred to the case of Stockloser v Johson & allowed the equitable relief against the forfeiture of the deposit.

32
Q

PART-PAYMENT

Recovery of part-payment

A

Mayson v Clouet:

  • Forfeiture of money in contract is only for deposit only;
  • all instalments & progressive payments, like any other part-payments, are recoverable by party.
  • the basis for recovery are:

1) The part-payment was conditional upon subsequent completion of the contract (i.e. since there is no completion, it ought to be returned); or
2) There is total failure of consideration (i.e. money paid is for consideration to perform obligation, no performance = ought to be returned).

33
Q

PART-PAYMENT

Equitable relief against forfeiture of part-payments

A

Chen Chow Lek v Tan Yew Lai:

  • MY courts will grant equitable relief in certain cases.
  • OTF, forfeiture would become a penalty since the appellant has almost fully paid up the sum when the vendor wanted to terminate the contract.
  • The appellant has acquired an equity of restitution.